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Don't File Yet! - 4 Alternatives To Bankruptcy

17 February 2015 by Kenneth Pierce

In 2012, a staggering 1,181,016 individuals filed for bankruptcy in the United States. While bankruptcy can benefit a lot of debtors, many simply can't afford the $1,500 average cost to file in addition to the staggering lawyer fees.

Luckily, there are a few alternatives to filing bankruptcy that can be just as effective at discharging debt and restoring your credit rating.

Settle Your Debts by Negotiating

While many debts are "hard and fast", and can't be negotiated or settled, certain debts, like medical bills and credit card debt in collections, can be negotiated down to a reduced payment. In certain cases, such as extreme economic hardship or illness, the sum total of remaining debt on accounts with a history of payments can be forgiven.

This is great for debt holders with certain categories of debt - while Chapter 7 bankruptcy filers can often have their debt forgiven through liquidation of assets and payment of reduced amounts, Federal Student Aid Loans are typically not forgiven. Negotiating the debt through the loan issuers can result in reduced payments, or even absolute forgiveness.

Sell Your Property

In many bankruptcy filing classes, specifically Chapter 7 bankruptcy, your assets will be liquidated by a trustee,w ho will assign value to your property and decide what is for sale and what is for personal ownership. You can cut out the middleman and save a lot of your property by selling before filing, earning more money for your items than you would ever get in a bankruptcy auction.

This has the added benefit of aiding you in getting out of debt before bankruptcy filing is a requirement - perhaps selling your extra car, excess jewelry, or assorted electronics can net you a big enough payday to pay down your debt and save the legal fees and hassle of bankruptcy proceedings.

Find Some Allies

Bankruptcy is hard to deal with - especially when dealt with alone. Finding allies can help you not only avoid bankruptcy, but promote better economic health and prevent further debt from piling up.

Consulting organizations such as the National Foundation for Credit Counseling can give you the tools you need to maintain your current level of wealth and prevent debt from becoming a long-term problem.

Consider the Ramifications

Ask yourself a simple question - "Do I Really Need to File Bankruptcy?" For most people, the answer is "no". While it may help in the short term, bankruptcy can damage your credit for years after filing, and often has adverse terms of settlement for the debtor.

Consider all your options, and decide whether bankruptcy is a simple, short-term solution, or a long-term process that you will use to heal your credit and financial standing for years to come.

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